Walgreens Boots Alliance Inc (NYSE: WBA) shareholders are hoping the stock can finally gain some traction when the company reports fiscal third-quarter earnings on June 28. Analysts are expecting a mostly in-line quarter from Walgreens as the company continues to navigate a rapidly evolving health care environment.
Consensus analyst estimates for the quarter are calling for earnings per share of $1.48 from Walgreens. Analysts are also anticipating quarterly revenue of $34.15 billion, up 13.4 percent from a year ago.
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Bank of America analyst Michael Cherny says that while Walgreens stock is currently trading at a discount to its historical earnings multiple range, the company has few near-term catalysts to suggest significant upside for the stock. Cherny is forecasting in-line EPS of $1.48 in the third quarter and full-year 2019 EPS of $5.95.
Cherny says Walgreens will likely report slightly negative same-store script growth thanks to a relatively weak market.
“The acquisition of the Rite Aid stores, as well as continued specialty growth contribution, should serve as a buffer, driving our modest U.S. pharmacy [earnings before interest and taxes] growth expectations for the quarter,” Cherny says.
He says investors shouldn’t anticipate any changes to previous guidance, especially since Walgreens chose not to update guidance at its recent analyst day event.
Walgreens is focusing on partnerships with companies such as Humana ( HUM) as a way to expand its reach and drive profit growth. Humana and Walgreens will be performing a pilot test of two in-store clinics in Walgreens locations in Kansas City. Any information on more partnerships or possible acquisitions or even additional creative solutions to stagnating profit growth would be potential positives for the stock.
“Long-term profit drivers of the retail pharmacy business are evolving, which will make long-term returns on capital increasingly difficult with Walgreens’ current business mix,” Cherny says.
CFRA analyst Joseph Agnese is more optimistic about the prospects for Walgreens now that it has completed its Rite Aid buyout and says investors should be watching margins closely on Thursday.
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“We see non-pharmacy sales declining as WBA focuses on margin expansion in a competitive environment rather than growing volumes, despite benefits from expanded beauty offerings,” Agnese says.
Bank of America has a “neutral” rating and $73 price target for Walgreens. CFRA has a “buy” rating and $79 target for WBA stock.
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Walgreens Boots Alliance Inc Earnings: What To Expect From WBA Stock originally appeared on usnews.com
